Birmingham BTR Will Be The Best The UK Has Ever Seen
Birmingham is coming late to the build-to-rent revolution, but this offers the city a real chance to learn lessons from North America, London and Manchester.
The result will be apartments that appeal to a wider demographic with amenities that really work.
Ahead of the Bisnow Birmingham BTR Update event on 11 September, Nikal's Nick Payne and Long Habour's James Aumonier explained how the experience of other cities will help Birmingham BTR become the best.
BTR is not just in its infancy, it is still firmly in the embryo stage.
There are barely a dozen BTR schemes planned or in progress in Birmingham, amounting to 2,000 units. This is a tiny fraction of a tiny market which, in the UK regions, has so far delivered only 15K units (according to British Property Federation data). A further 20,000 units are under construction outside the capital with another 33,000 in planning.
Birmingham joined the BTR battle fairly late, thanks in part to investors herding in a few other locations, and in part to Birmingham city council policy which left the brakes on (where other cities conspicuously took them off). As a result London, Leeds and Manchester are all ahead in terms of volume per capita. But their early starts have led to anxieties: Are too many schemes crowding into the same, small, premium sector? Is the demographic appeal too limited, with every BTR scheme competing in the same limited pool of recent graduates and young professionals?
As the first major Birmingham schemes reach completion, and the real day-to-day market test of letting and renting begins, is Birmingham well placed to benefit from others' experience?
You've Got To Please Everyone
Bisnow caught up with Long Harbour Chief Operating Officer James Aumonier whilst he was on a site visit in the Birmingham Jewellery Quarter. Aumonier spoke over the noise of reversing JCBs and jackhammers as he prospected for locations for further BTR investment. The visit came as Long Harbour's 206-unit Lansdowne scheme at Hagley Road begins to let.
Long Harbour teamed up with development partner SevenCapital and Interserve, the project’s construction partner, to deliver the £39M project, Birmingham's second BTR scheme.
“Every market is unique, with its own characteristics and drivers," Aumonier said. "People are waiting to see how markets in London, Manchester and Birmingham will react as new schemes complete and supply increases. It will take time to reach the natural price points in each location."
With pricing still uncertain, and residents' amenity needs still fluctuating, Long Harbour have chosen to keep their options open.
“In Birmingham our approach has been a cautious one," he said. "We are pushing the envelope on the product, which is great but with an eye on being able to maintain affordability. That appears to be paying off as we are already exceeding our rental expectations at The Lansdowne, but we want to price for the greatest market depth and to be inclusive."
For instance, the first person through the door at The Lansdowne was a professional in their 50s, Aumonier said. He added that the scheme's location on the edge of the Hagley Road office corridor and Edgbaston is an aspirational area, which helps. The average age of tenants is probably their mid-30s.
Aumonier is not as worried as some that the market is clustering in a few demographic pockets or at a handful of ambitious price points.
“I think there will be space for everyone in this market," he said. "But for us, inclusiveness is our key word. We don’t want to exclude any particular demographic and we want to deliver amenities that work for the local market but also bring the local community in to the building.”
The amenity offer is upscale but flexible. Premium bike storage and WeWork-style breakout zones jostle in Long Harbour schemes with proper functioning libraries full of books and comfortable drawing rooms with fireplaces.
“Residents love the flexibility of the space. They don’t feel confined to their apartments, and that is a real draw to our schemes,” Aumonier said.
“Residents love the flexibility of the space. It provides a canvass for them to create their own communities, without having a particular lifestyle designed for them by us as the developer. Residents themselves have input into the events that take place on site, and we encourage them to bring in the local community as much as possible. For example each building has a charity committee, which not only has a positive local impact but also helps to maintain a sense of place.”
Amenity Is An Experiment
According to Nikal Managing Director Nick Payne, now presiding over the £350M Exchange Square BTR scheme, Birmingham’s relatively late entry to the BTR market is a real advantage. He praises the city council’s approach.
“The consequence of coming a little later to BTR is that the schemes we are seeing are high-quality, and sometimes exemplars," he said. "That’s been helped by the city council wanting to know in advance, is this residential scheme for open-market sale or for BTR? The approach of the council is different to Manchester’s, and that helps because right upfront the council and everyone else buys into the amenity offer, and the shared community space.
“Birmingham has learned that BTR is about more than a tower, it is about the spaces between them. It’s all about pedestrians and the wider master planning.”
In December listed residential landlord and PRS specialist Grainger agreed to forward-fund and acquire a 373-apartment second phase at Exchange Square for £77M.
Planning permission was granted in 2016 for 223 apartments across two buildings of seven and 14 storeys. Last year, Nikal announced ambitions to increase the number of units, releasing images of a conceptual 46-storey residential tower.
Like Long Harbour, Nikal is banking on an upscale amenity offer with the broadest appeal.
“BTR is so embryonic that you really have to appeal to the widest audience. So that includes younger people who want a lifestyle more than a lobby and a letterbox. But that doesn’t mean excluding older residents. The amenity should appeal to everyone and initially we have to offer as much as we can.”
Fostering (or creating) a sense of community is key, Payne said. His experience in Manchester has left him convinced that residential development cannot thrive if it is at the expense of existing communities.
“Areas like Digbeth have great opportunities, it reminds me of Clerkenwell or Shoreditch a few years ago. And there is no reason why Digbeth should lose its identity as a fantastic place to start or move a small or medium sized business. More people living there will not change that.”
HS2 Is A Worry
So is everything moving smoothly toward Birmingham BTR success? Maybe not.
Confusion about the intentions of the new prime minister regarding the HS2 high speed rail line are causing concern in the sector. Sometimes Boris Johnson appears sceptical about the value of the line, now said to cost as much as £100B. On other occasions the signal from Downing Street has been interpreted as more positive.
Long Harbour’s Aumonier hopes that HS2 is safe, but is sanguine about it either way.
“It would be a real shame if it didn’t happen, but having said that I don’t see the trend to regionalisation of the economy coming to a halt without HS2," he said. "Birmingham has momentum already, of course HS2 helps, but we’re looking at further investment in Birmingham irrespective of HS2. The city is having a once-in-a-generation rebirth and we want to be part of it.”
“HS2 is an important stimulant to the Birmingham BTR market," he said. "We hope to see people living in Birmingham but working in London,” Payne said of his scheme, a stone’s throw from the proposed Curzon Street HS2 station."
“Obviously the government needs to watch funding issues, one can understand the Treasury looking closely at value for money and that worries me, because we aren’t there yet on certainty. But if they are reviewing the figures, I am confident a good case can be made for HS2.
“It is really important for the Midlands that HS2 happens, it would be very uncomfortable if it didn’t because BTR and other sectors like banking are basing their plans on HS2.”
Don't let the monumental size of Birmingham's new BTR blocks fool you: the sector is still fragile, and economic or infrastructure shocks could deliver dangerous blows. But if the amenity mix is good, and the price is right, Birmingham's BTR sector could be a market leader.